During the past nine months ever since Reserve Bank of India (RBI) started to raise repo rates, commercial banks, too, have also been raising interest rates on fixed (or term) deposits across tenors.
Although the increase in fixed deposits (FDs) interest rates has been lower than the repo rate hike, the interest rates have risen to as nearly 7.5 to 8 percent per annum.
In order to maximise the earnings via fixed deposits, therefore, investors can opt for special tenor term deposits over the regular ones.
For instance, Bank of Baroda, under its Tiranga plus deposit scheme, offers 7.05 percent for deposits of 399-day tenor, whereas the 400-day tenor deposit will fetch a lower return of 6.75 percent per annum.
|Bank||Tenor||Interest (%)||Senior Citizens|
|Bank of Baroda||399 days||7.05||7.55|
|Canara Bank||400 days||7.15||7.65|
|Karnataka Bank||555 days||7.3||7.7|
|Bandhan Bank||600 days||8||8.5|
Similarly, Canara Bank offers 7.15 percent on term deposits of 400-day tenor whereas if someone chooses a tenor of 401 days, the rate of interest would decline to 6.8 percent.
Punjab National Bank (PNB) now offers gives a higher rate of interest of 7.25 percent on FDs of 666-day tenor, while the interest rate falls to 6.75 percent on deposits of 667-day tenor.
The depositors who opened term deposit accounts with Karnataka Bank for 555 days are entitled to earn 7.3 percent against 6.8 percent for 556-day deposits.
Also, the maximum interest is offered by Bandhan Bank that offers 8 percent interest on 600-day term deposits against 7.25 percent offered on slightly longer deposits.
ALSO READ: Bandhan Bank hikes interest rates on fixed deposits
Needless to mention that the senior citizens are entitled to earn even higher rate of interest i.e., 50 basis points more than offered to the younger investors.
However, before investing the money in term deposits, investors should make note of the following points:
1. Don't stay confined to one tenor: It’s always recommended to choose term deposits across tenors. Merely to earn 50-70 basis points higher interest, investors should not put a lot of money in these special term deposits, particularly because they are long duration deposits.
2. For higher return: Investors can invest in the name of their parents to earn a higher interest. Also, if you fall in the highest tax slab, you can invest money in the name of your adult children so long as they are either students or fall in the lower tax slab. This will lead to a lower tax outgo.
3. Don't ignore financial goals: It’s vital to ensure that the tenor of these deposits coincide with your financial goals. So, if you have a financial goal which is due in the next one year or so, it is not rational to lock your savings in a long duration deposit of such kinds.